A family office is a private wealth management advisory firm that is established by an Ultra-UHNWI to manage their family's private wealth. Any firm that provides investment advice only to family members, is wholly owned and controlled by family members, and does not hold itself out to the public as an investment advisor is considered a family office . However, a family office goes beyond just managing wealth. It also helps secure a family's financial future by building, preserving, and transferring family wealth and legacy.
While early family offices can be traced to Europe, it was in the early 19th century that wealthy merchants along the east coast of the United States started hiring advisors for protecting their family interests. The demand for family office services kept growing as the number of Ultra-HNWI s increased over the years.
Today, wealthy families rely on family offices for full time professional management of their personal fortune. The number of family offices in U.S. has grown to about 3,000 single-family offices, with assets under management between $1 trillion and $1.2 trillion. There are also about 150 multi-family offices having assets under management between $400 billion to $450 billion.
However, the growth of family offices has not gone unnoticed by private wealth management firms who have started offering family office types of services for Ultra-HNWIs. This puts family offices directly in competition with private banks. However, in the wake of the financial crisis of 2007-09, Ultra-HNWIs have a fragile level of trust and confidence in banks, and increasingly prefer family offices. Family offices currently stand amid a landscape filled with opportunities to further expand their business.
However, they are also struggling with regulatory, operational, and technological challenges which may slow down their growth. It therefore becomes imperative
to understand these challenges and make business decisions that will help family offices emerge successfully in an environment of intense
competition with private banks and other wealth management firms.
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